To study epidermal differentiation and carcinogenesis, cDNA and genomic clones corresponding to the major proteins expressed in mouse epidermis have been isolated and characterized. These include the basal layer keratins K5 and K14 and the suprabasal layer keratins K1 and K10. In addition, cDNA and genomic clones for filaggrin, the protein which organizes keratin filaments into larger bundles, and loricrin, the major precursor protein of the cornified envelope, have been isolated. Monospecific antibodies to the C terminal amino acid sequences, as well as nucleic acid probes to unique regions of the cDNAs, allow the study of the expression of these markers in normal epidermis, benign and malignant tumors, and cells in culture. An epidermal-specific regulatory region in a 10.8 kb fragment of the human K1 gene was localized in recombinant constructs with a reporter gene. A calcium-sensitive positive regulatory region was located 3' to the coding sequence. Deletion analysis identified several shorter elements in the terminal-1700 nucleotides which function in vitro and in vivo. Gene expression in the epidermis is regulated by protein kinase C, which upon activation, inhibits expression of spinous cell markers and enhances expression of granular cell markers. Protein kinase C activity is likely to be regulated by changes in phospholipase C and intracellular calcium during differentiation. Hair follicle development in vivo is regulated by dermal papilla cells and in vitro studies suggest that the induction of secreted proteases is important in the process.